Strategic Behaviors of CPO and Phosrock

Strategic Behaviors of CPO and Phosrock. Three types of strategies marked the world phosphate market between 1960 and 1975/1978. The low prices observed between 1960 and 1967 are the result of an agreement between American firms and African firms controlled by France.

Both actors were both producers of raw phosphate and consumers. The production of phosphate fertilizers allowed them greater competitiveness in the economic sector of the product. The second strategy corresponds to secret price decreases with a view to winning world market shares after the independence of the French colonies in Africa: this is the phase of competition that goes from 1968 to 1972. Finally OCP triggered the 1973 crisis to claim a dominant position in the international market. The contract for the sale of raw phosphate between OCP and Phosrock is a strategic alliance, preventing any further crisis in the international phosphate market. The price resulting from this sales contract, covering more than a decade and systematically revised each year, is currently in the range of 40/45 dollars per ton; it is lower than the cost of operating new fields ($ 90/100 per ton) and prevents market penetration by new producers. The coalition also has a large production capacity and more than half of the world’s reserves. By this weapon, the coalition can create a surplus market situation and prevent the entry of competitors by a temporary fall in prices. The logic of the price-limit policy is the same as that of a producer price system. The system allows controlled market regulation and price stability (Calabre, 1997, op.cit, 179). He gave interesting experiments in the 50s and 70s for lead, zinc, aluminum, nickel, molybdenum, platinum and cobalt. The analysis of strategic behaviors showed that OCP’s attitude consists in a first step to react in the opposite direction to the behavior of Phosrock, who is his first client; in the second stage, the determination of the world price results from an agreement between the two actors insofar as their aggregate production explains the evolution of the price. However, there are annual negotiations for the sale of raw Phospock Phosphate phosphate, which also involves phosphate fertilizer manufacturers.